Nevsun Denies Accusations of Human-Rights Abuses at Eritrea Mine

Nevsun Resources Ltd., a takeover target which mines gold and copper in Eritrea, is being sued for alleged complicity in human-rights abuses at its operations in the African nation. The company denied the allegations.

The suit filed yesterday by three plaintiffs in the Supreme Court of British Columbia claims the Vancouver-based company’s Bisha mine was built using “forced” laborers who faced the threat of torture by the Eritrean government, according to the filing.

“We are confident that the allegations are unfounded,” Nevsun Chief Executive Officer Cliff Davis said in a statement. “Based on various company-led and third-party audits, the Bisha mine has adhered at all times to international standards of governance, workplace conditions and health and safety.”

Human rights conditions in Eritrea are “dismal” with indefinite military service, torture, arbitrary detention and restrictions on freedom of expression driving a refugee exodus, according to Human Rights Watch. Military conscripts provide forced labor in civilian roles, the New York-based group said in its World Report 2014.

Nevsun has a 60 percent shareholding in Bisha Mining Share Co., while the Eritrean government holds the remaining stake through the state-owned Eritrean National Mining Corp. The mine produced only gold until last year, when it began to expand into copper and zinc. It plans to produce 80,000 metric tons to 90,000 tons of copper this year and aims to start zinc production at the beginning of 2016. The site is located 90 miles (145 kilometers) west of Eritrea’s capital, Asmara.

No one answered the phone at Bisha Mining Share when Bloomberg called today outside regular office hours.

Segen Subcontractor

QKR Corp., a mining fund headed by former JPMorgan Chase & Co. banker Lloyd Pengilly, is close to making a bid of about $1 billion for Nevsun, according to people with knowledge of the situation. QKR is funded by Qatar’s sovereign wealth fund and Jan Kulczyk, Poland’s richest man.

Nevsun confirmed yesterday that it has received from various parties expressions of interest on a potential corporate transaction and that any discussions are at a preliminary stage.

The lawsuit alleges that by entering a commercial relationship with the Eritrean government, Nevsun “aided, abetted, contributed to and became an accomplice to the use of forced labor, crimes against humanity and other human rights abuses at the Bisha mine.”

The trio of plaintiffs in the case against Nevsun, all Eritrean nationals who say they fled the country after being forced to work at the mine, are seeking damages, according to the court filing. To build the mine, Nevsun “engaged” companies called Segen, Mereb and the Eritrean military, which sourced the “forced labor,” the filing says.

Joe Fiorante of Vancouver-based Camp Fiorante Matthews Mogerman and Dimitri Lascaris, a partner at Siskinds in London, Ontario, are co-counsels for the plaintiffs, according to a statement.

The case is Gize Yebeyo Araya, Kesete Tekle Fshazion and Mihretab Yemane Tekle v. Nevsun Resources Ltd., S-148932, Supreme Court of British Columbia, Vancouver.

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